State asset plan a smart move: IPO expert

Deutsche Bank's Ivor Dunbar says selling stakes in state assets would give investors the chance to diversify from property. Photo / Brett Phibbs

A "big liquidity event" such as the Government's partial privatisation plans would give New Zealand's capital markets some much-needed impetus, Ivor Dunbar, Deutsche Bank's head of global capital markets, said yesterday.

The Government has signalled its intention to partially privatise state-owned power generators Genesis, Meridian and Mighty River Power, coal company Solid Energy and to sell down its majority interest in Air New Zealand.

London-based Dunbar, who has been involved in several of the world's largest initial public offers (IPOs), including General Motors, said the "re-equitisation" of New Zealand would be an interesting debate.

Dunbar said the Government's partial privatisation plans could provide the local sharemarket with some growth potential.

"There is no question, if you provide a big liquidity event, and that encourages more people to focus on investing in stocks that are quoted on the New Zealand stock exchange, then it will reduce the cost of capital for other New Zealand companies to come to the market, so, yes, I would expect that to be a catalyst," Dunbar said.

"In contrast to the debt side of the capital markets, where you've got plenty of product, plenty of supply and very willing demand - on the equities side there is not much product."

He said the opportunities for New Zealand capital markets were significant, but that much would depend on how the Government's plans were executed.

"It's hard to see the 'float' of the New Zealand stock exchange growing dramatically without a big liquidity event like the one that the Government is talking about," he said.

Dunbar said the Government's plans would give investors the opportunity to diversify their investment risk away from property.

"I can see a virtuous circle where you can provide liquidity to the stock exchange, where retail investors are encouraged to participate, where they hold on to their investments, where they can enjoy appreciation in the value of those assets over time as these companies expand, grow and become better managed," he said.

"I think it is a smart proposition, but first of all Government has to persuade the population that the proposals are good proposals and that they need to go ahead and execute it," Dunbar said.

"The key is the success of the execution."